Deduction of tax at source-Income-tax deduction from salaries during the financial year 1984-85 under section 192 of the Income-tax Act, 1961-Regarding - Income Tax - 407/1985

Deduction of tax at source-Income-tax deduction from salaries during the financial year 1984-85 under section 192 of the Income-tax Act, 1961-Regarding Circular No. 407 Dated 1/2/1985 From: Sh. B. Nagarajan, Secretary, Central Board of Direct Taxes. To All State Governments (including Administration of Union Territories). Subject: Deduction of tax at source-Income-tax deduction from salaries during the financial year 1984-85 under section 192 of the Income-tax Act, 1961-Regarding. Sir, I am directed to invite a reference to this Ministry's Circular No. 388 [F. No. 275/13/84-IT(B)] dated July 16, 1984, printed at [1984] 148 ITR (St.) 15 on the above subject and to say that in para. 4(vi) therein it has been stated that exemption in respect of house rent allowance under section 10(13A) of the Income-tax Act, 1961 to the assessee occupying his own house may be granted to the employee assessable/assessed to income-tax under the jurisdiction of the Punjab and Haryana High Court in view of its judgment in the case of Justice S.C. Mittal [1980] 121 ITR 530. 2. The following Explanation has been inserted in clause (13A) of section 10 of the Income-tax Act by section 4(c) of the Taxation Laws (Amendment) Act, 1984: "Explanation .-For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where- (a) the residential accommodation occupied by the assessee is owned by him; or (b) the assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him." In view of the retrospective insertion of this Explanation with effect from the 1st day of April, 1976, the exemption in respect of such house rent allowance has become inadmissible. It is requested that the relevant portion in para. 4(vi) of the Circular, referred to above, may please be treated to have been withdrawn and the circular may please be modified accordingly. The income on this account may, therefore, please be included for the purpose of computing total income for the financial year 1984-85. 3. Wherever, following para. 4(vi) of Circular dated July 16, 1984, tax has not been recovered on such HRA, the drawing and disbursing officers are advised to recover the same from salary payable by March 31, 1985. 4. It may also be added that the Taxation Laws (Amendment) Act, 1984, has inserted a new sub-clause (vi) under clause (2) of section 17 of the Income-tax Act with effect from April 1, 1985, which reads as under: "(vi) where the employer has advanced any loan to the employee for the purpose of building a house or purchasing a site or a house and a site or for purchasing a motor car, and either no interest is charged by the employer on the amount of such loan or interest is charged at a rate lower than the rate of interest which the Central Government may, having regard to the rate of interest charged by it from its employees on loans for such purpose granted to them, specify in this behalf by notification in the Official Gazette, an amount, equal to,- (a) in a case where such loan is advanced without charging any interest, the interest calculated in the prescribed manner on such loan at the rate so specified; (b) in a case where such loan is advanced by charging interest at a rate lower than the rate so specified, the difference between the interest calculated in the prescribed manner on such loan at the rate so specified and the interest charged by the employer: Provided that this sub-clause shall not apply in the case of- (1) an employee of the Central Government or any State Government; or (2) an employee, not being an employee referred to in paragraph (a) or paragraph (b) of sub-clause (iii), whose income under the head 'Salaries', exclusive of the value of all benefits or amenities not provided for by way of monetary payment, does not exceed eighteen thousand rupees." This may be added as a sub-para. to item No. (ii) of para. 4 of the Board's circular No. 388 (F. No. 275/13/84-IT(B) dated July 16, 1984 ([1984] 148 ITR (St.) 15). 5. These instructions may please be brought to the notice of all drawing and disbursing officers and State undertakings, etc., under the control of the State Govt. This may please be treated as urgent. Yours faithfully (Sd.) B. Nagarajan Secretary Central Board of Direct Taxes.